Neighbours urged to look at baht bonds

Neighbours urged to look at baht bonds

Sommai: Thai market can help investments

Finance Minister Sommai Phasee has urged both the public and private sectors in Cambodia, Laos, Myanmar and Vietnam to issue baht-denominated bonds to raise funds for their infrastructure investments.

Laos is the only country among the four to have raised a baht bond after the Finance Ministry relaxed regulations by allowing the countries to issue baht bonds without a credit rating if such debt instruments were guaranteed by their governments.

They can also use credit ratings assigned by Thailand's rating agencies instead of international agencies in cases where their papers are not guaranteed by their governments.

The Laotian government had mobilised 9.59 billion baht of its sovereign debt in Thailand, while Laos' state-majority-owned power producer EDL-Generation Plc is the latest to raise funds from Thailand's capital market.

The power generator floated bonds worth 6.5 billion baht in Thailand last October to finance its acquisition of nine hydropower plants from parent Electricite du Laos.

Mr Sommai said the baht bond issuance would comply with the Finance Ministry's intention to make the baht widely used in those countries. The baht has been among the stronger Asian currencies against the greenback this year. Others are Malaysia's ringgit, South Korea's won and China's yuan.

At the end of last year, baht bonds amounted to 91.3 billion baht or 1% of total domestic bonds.

South Korea is the largest baht bond issuer, accounting for 59% of issued baht-denominated bonds, followed by Laos at 18% and other countries making up the rest.

A Finance Ministry source said encouraging the four countries to issue baht bonds would also support inclusive growth in the Asean region.  

He said Thai debt instruments had played a greater role in the capital market, as seen by the fact that the bond-to-GDP ratio surged to 76% in 2014 from 11% in 1997.

However, the bond ratio was still below those of commercial loans (106%) and equities (114%) last year.

The domestic debt market is the biggest borrowing source for the Thai government, with 98% of overall public debt. The government borrowed only 2% overseas.

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